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Tag: economic policies

Professor William Easterly, the economic development expert from New York University, has written an excellent comment for the Financial Times online. He writes, “The Millennium Development Goals [summit that wraps up in NY today] tragically misused the world’s goodwill to support failed official aid approaches to global poverty and gave virtually no support to proven approaches. … But current experience and history both speak loudly that the only real engine of growth out of poverty is private business, and there is no evidence that aid fuels such growth.”

At the Center for Global Liberty and Prosperity, we have continuously emphasized the power of trade to help the poor escape poverty. Unfortunately, politicians in rich countries find it easier to waste billions of taxpayers’ dollars in the form of foreign aid than to take on special interests that thrive on trade protectionism; hence European and American agricultural tariffs and subsidies.

However, the impact of rich countries’ protectionism should not be exaggerated. African countries are typically more protectionist than rich countries. In fact, they are more protectionist against one another than against rich countries. The sad truth is that poor countries are perfectly able to shoot themselves in the foot by following growth-killing economic policies – irrespective of what the rich countries do.

Foreign aid, incidentally, has been ineffective at promoting liberalization.

The [Congressional Budget Office] concluded that premiums for people buying their own coverage would go up by an average of 10 percent to 13 percent, compared with the levels they’d reach without the legislation…

“People are likely to not buy the same low-value policies they are buying now,” said health economist Len Nichols of George Mason University. “If they did buy the same value plans … the premium would be lower than it is now. This makes the White House statement true. But is it possibly misleading for some people? Sure.”

Nichols’ comments are also misleading – which makes the president’s statement not just misleading but untrue.

Note also that the CBO predicts premiums would rise by an average of 10-13 percent in the individual market. Consumers who currently purchase the most economic policies would see larger premium increases.

Finally, the Obama plan would also force millions of uninsured Americans to purchase health insurance at premiums higher than current-law premium levels, which they have already rejected as being too high. Their premium expenditures would rise from $0 to thousands of dollars. Yet the CBO counts that implicit tax as reducing average premiums, because those consumers are generally healthier-than-average. Only in Washington is a tax counted as a savings.

Like the sequel to a horror film, the politicians in Washington just passed another stimulus proposal. Only this time, they’re calling it a “jobs bill” in hopes that a different name will yield a better result.

But if past performance is any indicator of future results, this is bad news for taxpayers. By every possible measure, the first stimulus was a flop. But don’t take my word for it. Instead, look at what the White House said would happen.

The Administration early last year said that doing nothing would mean an unemployment rate of nine percent. Spending $787 billion, they said, was necessary to keep the unemployment rate at eight percent instead.

So what happened? As millions of Americans can painfully attest, the jobless rate actually climbed to 10 percent, a full percentage point higher than Obama claimed it would be if no bill was passed.

The President and his people also are arguing that the so-called stimulus is responsible for two million jobs. Yet according to the Department of Labor, total employment has dropped significantly – by more than three million – since the so-called stimulus was adopted. The White House wants us to believe this sow’s ear is really a silk purse by claiming that the economy actually would have lost more than five million jobs without all the new pork-barrel spending. This is the infamous “jobs saved or created” number. The advantage of this approach is that there are no objective benchmarks. Unemployment could climb to 15 percent, but Obama’s people can always say there would be two million fewer jobs without all the added government spending.

To be fair, this does not mean that Obama’s supposed stimulus caused unemployment to jump to 10 percent. In all likelihood, a big jump in unemployment was probably going to occur regardless of whether politicians squandered another $787 billion. The White House was foolish to make specific predictions that now can be used to discredit the stimulus, but it’s also true that Obama inherited a mess – and that mess seems to be worse than most people thought.

Moreover, it takes time for an Administration to implement changes and impact the economy’s performance. Reagan took office in early 1981 during an economic crisis, for instance, and it took about two years for his policies to rejuvenate the economy. It certainly seems fair to also give Obama time to get the economy moving again.

That being said, there is little reason to expect good results for Obama in the future. Reagan reversed the big-government policies of his predecessor. Obama, by contrast, is continuing Bush’s big-government approach. Heck, the only real difference in their economic policies is that Bush was a borrow-and-spender and Obama is a borrow-and-tax-and-spender.

This raises an interesting question: Since last year’s stimulus was a flop, isn’t the Administration making a big mistake by doing the same thing all over again?

The President’s people actually are being very clever. Recessions don’t last forever. Indeed, the average downturn lasts only about one year. And since the recession began back in late 2007, it’s quite likely that the economic recovery already has begun (the National Bureau of Economic Research is the organization that eventually will announce when the recession officially ended).

So let’s consider the political incentives for the Administration. Last year’s stimulus is seen as a flop. So as the economy recovers this year, it will be difficult for Obama to claim that this was because of a pork-filled spending bill adopted early last year. But with the passing of a supposed jobs bill, that puts them in a position to take credit for a recovery that was already happening anyway.

That may be smart politics, but it’s not good economics. The issue has never been whether the economy would climb out of recession. The real challenge is whether the economy will enjoy good growth once the recovery begins. Unfortunately, the Obama Administration policies of bigger government – combined with the Bush Administration policies of bigger government – will permanently lower the baseline growth of the United States.

If America becomes a big-government welfare state like France, then it’s quite likely that we will suffer from French-style stagnation and lower living standards.

Let us for a moment [assume] that a person’s ideology is solely determined by his policy views. And let us also assume that social and economic liberties can largely be disentangled and that libertarians are as close to liberals on social issues as they are to conservatives on economic ones – a view implicit in the argument for liberaltarianism. Still, our data show that different aspects of ideology are not equally important for a person’s ideological identity, and, somewhat ironically, that this is especially true of libertarians. For all their insistence that liberty has multiple facets, libertarians appear to cherish one of them much more than others.

Supporting data shows that 60% of self-described libertarians find “economics” more important than the “social/cultural,” “foreign policy,” “energy/environment” or “other/not sure” issue areas.

I’m not convinced. A common libertarian approach to any issue is to begin with the economics of that issue. Certainly it’s true of energy and the environment. It’s also very likely true of foreign policy, because wars aren’t cheap, and it’s at least plausibly true of social and cultural issues. Libertarians see economics everywhere, not just in “economic” policies. It’s a common belief in our tribe that we are among the very few to grasp sound economic principles at all.

We can (and should) debate whether this is true, of course, but such is libertarian belief. And when conservatives abandon what we see as sound economics – as with the George W. Bush administration – well, we start looking for the exits.

Lately, though, it’s been easy for libertarians to return to conservatism. To no one’s great surprise, the Obama administration has continued the profligate spending. We may have hoped that the new administration would compensate in other areas, but this just hasn’t happened. The Guantanamo Bay detention camp should have been closed by now. On military tribunals, search and seizure issues, indefinite detention, and our expensive, never-ending foreign wars, there’s little difference between this administration and the last.

I don’t want to say that liberaltarianism is dead. But is it endangered? Sure. It deserves to be.

Today’s young conservatives appear embarrassed by the culture wars, which must seem to them like a relic from someone else’s past. Many young conservatives have known a literal state of war for their entire adult lives. They may not even remember the last balanced federal budget. And they know that putting a Democrat in the White House hasn’t helped. Personally, I’m no conservative. But there is strength in fickleness, and if conservatives can do better, then good for them.

Globalization holds tremendous promise to improve human welfare but can also cause conflicts and crises. How will competition for resources, employment, and growth shape economic policies among developed nations as they attempt to maintain productivity growth, social protections, and extensive political and cultural freedoms?

Politifact.com looked into a remark from Rep. Carolyn Maloney, D-N.Y., that “Democrats have been considerably more effective at creating private-sector jobs.”

The statement was rated true, as a purely statistical matter. Yet the poltifact researcher did a good job questioning the significance of his own figures. He noted, correctly, that the president usually “deserves less credit for the good times – and less blame for the bad times.” And he added that job figures can be driven by outside factors such as oil price shocks, demographic changes or soldiers coming home after World War Two. He wryly noted “how surprised we are that Eisenhower, who presided over the ‘happy’ 1950s, managed an anemic half-percent job growth per year, while Jimmy “Malaise” Carter finished second with 3.45 percent annual job growth.” Anyone who remembers the runaway inflation of the Carter era will realize that annual rates of job growth are not enough to describe the overall economic situation.

The author also quoted me making the point that “timing can be hugely important.” It is so important, in fact, that we may need to add another dimension to politifact’s true-false meter to deal with political comments that are simply meaningless.

For the record, what follows is the full text of my email on this topic:

The error involved with assigning rates of job growth to Presidential terms is that six recent Presidents took office within a few months of the start of a recession: Obama (recession began December 2007), H.W. Bush (July 1990), G.W. Bush (Mar 2001), Reagan (July 1981), Nixon (Dec. 1969) and Ike (July 1953). As it happens, four of the five were Republicans.

One might argue that recessions launched near the end of the previous administration helped get these men elected. But these recessions were clearly left over from events that began previous years. It didn’t help that the first Pres. Bush passed a tax increase three months after the 1990 recession began, but the start of that recession is more plausibly blamed on the earlier spike in oil prices when Iraq invaded Kuwait.

Since employment is a lagging indicator (one of the last things to improve), that means average job growth among Presidents who took office near the start of recessions is bound to look bad in comparison with Presidents who took office after an expansion was well underway. Bill Clinton took office in 1993, long after recession ended in March 1991. The same was true of Truman, LBJ and Carter. JFK took office a month before the 1960 recession ended.

Two-term Presidents also have more time to show good numbers, but only if they’re lucky enough to get out of office just before the next recession starts. Clinton squeaked by (despite falling stock prices and industrial production 2000), but Nixon, Eisenhower, Carter and G.W. Bush did not.

Since Bush 2nd began and ended office in recession, averages over 8 years outweigh 4 reasonably good years. This unprecedented bad timing is exaggerated by Paul Krugman’s comparison of “decades” [and President Obama’s recent reference to “the lost decade” of 1999-2009] which relies on starting and ending each decade in boomy 1959 rather than slumping 1960, ditto 1969 rather than 1970, 1979 rather than 1980, 1989 rather than 1990, and 1999 rather than 2000.

In short, statistics about employment growth over Presidential terms are dominated by the timing of the “business cycle” (including Federal Reserve policy), and have no apparent connection to economic policies attributed to the White House (as opposed to Congress).

Doug Bandow: “Congress has spent the country blind, inflated a disastrous housing bubble, subsidized every special interest with a letterhead and lobbyist, and created a wasteful, incompetent bureaucracy that fills Washington. But now, legislators want to take a break from all their good work and save college football.”